Advancing gender equality: How investors and society benefit

Olaf Martin, Junwei Hafner-Cai, and Rachel Whittaker

Improving equality between men and women within companies yields tangible benefits in terms of societal impact, and there is strong evidence that it can improve firms’ financial performance too. With this in mind, last year we launched the RobecoSAM Global Gender Equality Impact Equities Strategy, which aims to generate attractive returns and make a positive impact on society by investing in companies around the world that take gender equality issues seriously. We spoke to the strategy’s co-portfolio managers Junwei Hafner-Cai and Olaf Martin, and senior analyst Rachel Whittaker to find out more about the strategy and why gender equality equities offer strong earning potential.

What does your gender equality equities strategy look like?

Junwei Hafner-Cai: It’s a portfolio of 60 to 65 equities from around the world, which are well-diversified by sector and region, targeting a tracking error against the MSCI World of 3 to 5%. What sets it apart is that when we construct the initial investment universe, we only include firms with above average gender equality performance. From there, we construct the portfolio according to a more traditional approach, focusing on fundamental analysis and the use of quantitative factors.

Olaf Martin: The strategy’s focus on gender equality naturally generates a portfolio with a bias towards “quality” stocks. Therefore, we tend to invest in companies with high and sustainable return on investment, positive free cash flow generation and strong balance sheets. We avoid industries that we consider to be unsustainable, such as weapons manufacturing, tobacco, alcohol, adult entertainment and gambling. We also avoid any companies with links to child labor.


What does corporate gender equality mean exactly?

Rachel Whittaker: Measuring gender equality is more complex than just calculating the proportion of women on the executive board or counting the number of female employees. When we’re assessing a firm’s gender equality practices, we also consider factors such as the type of policies that it puts in place to ensure board diversity, how successful it is at retaining female talent throughout the management chain, and whether it remunerates men and women equally.
We also look at company policies regarding employee satisfaction and work-life balance, such as options for flexible and part-time work in order to accommodate staff who care for children or elderly. That’s because we know that these issues have a disproportionate influence on the likelihood of women remaining in the workforce. 

How does corporate gender equality affect investment performance?

Junwei Hafner-Cai: It’s logical that if companies can keep their best people – whether male or female – then they should have a better chance of outperforming. Gender diversity policies should also reward a company with access to a bigger talent pool, a reputation as a more attractive employer for skilled people, and more motivated employees. And now, there’s some strong evidence to back this up. We’ve been researching this area for years, and we’ve found that a portfolio of companies with high gender equality scores consistently outperforms a portfolio of firms with substandard ones. (
Olaf Martin: There is clearly scope for an active manager to add value in this area. Gender inequality is still a problem in every industry, despite ongoing work in many countries to promote diversity. This means that there is considerable potential to outperform by identifying and investing in companies that take gender equality seriously.  


"Measuring gender equality is more complex than just calculating the proportion of women on the executive board or counting the number of female employees."  
Where does your information on gender equality come from?

Rachel Whittaker: The data comes from our annual Corporate Sustainability Assessment (CSA), which is the source of information behind the Dow Jones Sustainability Indices. Each year, we send a detailed questionnaire to over 3,400 companies around the world, covering a broad range of general and industry-specific criteria, including gender-related topics. Using the gender-related criteria described earlier, we rank companies within an industry and region according to how well they manage these factors. 

Are some industries or regions more ‘gender equal’ than others?

Junwei Hafner-Cai: We see more opportunities in some regions than others. For example, companies in Western Europe tend to score better than firms in Japan and elsewhere in the Asian-Pacific region. In terms of sectors, telecommunications and utilities companies generally score better on gender equality than IT firms. This doesn’t mean that we won’t invest in Japan or the IT sector, for example, but it means that we need to look a bit harder to find attractive gender equality investments in these areas. 

How does investing in the strategy help generate a positive impact on society?

Rachel Whittaker: It helps in a number of ways. First, we allocate capital to companies that are promoting more equitable labor forces. Second, we use our influence to promote change – in our Corporate Sustainability Assessment, we ask companies difficult questions about diversity and equality, sending a clear message that investors expect firms to start measuring and reporting on these issues. Finally, we actively engage with companies, encouraging them to improve their practices.
So far the integration of gender diversity in our engagement specialists’ work has been mainly at board level – trying to tackle what we call “male, pale, and stale” corporate boards. But increasingly, we’re looking beyond the board. One financial institution we’ve engaged with has 40% of women on the board, but its internal target for women in senior management levels is much lower – we think these targets should be aligned. It has a 50:50 split in its workforce, so over time we would expect the proportions at all levels to converge.

"We use our influence to promote change...we ask companies difficult questions about diversity and equality, and we actively engage with companies, encouraging them to improve their practices."

Is your research backed up by the findings of other experts?

Rachel Whittaker: Our findings are backed up by a growing body of academic and industry research suggesting that corporate gender equality can have a positive influence on company performance. Let’s consider some figures:   




What makes your gender equality investment strategy unique?

Rachel Whittaker: The RobecoSAM Gender Equality strategy is unique because we know that we have a positive impact through asking questions. Companies participating in our assessment regularly report to us that our assessment helps shape their sustainable business strategy. Since we started asking detailed questions on remuneration and gender representation, we have seen a significant increase in the number of companies reporting both publicly and privately on these metrics. Not only are companies becoming more transparent, they also want to highlight the importance of gender issues to investors, and we believe that what gets measured, gets managed. 

"We believe that our proprietary investment process results in a strategy that can have a significant influence on advancing gender equality around the world." 

Junwei Hafner-Cai: We believe that our proprietary investment process results in a strategy that can have a significant influence on advancing gender equality around the world. The Gender Equality strategy has outperformed its benchmark (MSCI World) by 1.8% in euros since inception in September 2015, while maintaining a similar risk profile.
Furthermore, we also support grassroots initiatives in our local community by supporting networks that promote female representation in businesses and empower professional women in our community, and by organizing events and sharing our research expertise.